>> schieffer: welcome back to "face the nation" page two. the first presidential debate, as we've been saying, will be held wednesday. it will focus on domestic,such as the economy, health care, and governing. so we've assembled a panel of distinguish americans, i would say, to talk about the state of country and where they think america is today. mark zandi is with the moody analytics. he has a new book out called, "paying the price, ending the great recession and building a new american century." michelle rhee is the head of students first, an organization that hopes to reform public education. she, of course, is the former head ofure d.c. schools. former speaker newt gingrich is rejoining us. he does not have a new book out, but his wife calista, does have a new book out, a children's book that will be coming out tomorrow. bob woodward, an associate editor of the "washington post" is the author of "the price of politics" he's written more books than this entire table combined.

well, maybe not when you put newt gingrich in there. and pulitzer prize-winning author hendrick smith who has a new book called, "who stole the american dream?" all you people are here to sell books. that's pretty clear. ( laughter ) no, i'm teasing. we're glad to have all of you. mark zandi, let's just talk about what is the state of the american economy right now with just five weeks before we get to this election? the job numbers came out this week on tuesday. we had some very good economic news. housing numbers were up. consumer confidence was up. reports of companies hiring for the holidays seem to be up. but then later in the week, the gross domestic product is down. do you think that american amere confused when they turn on their televisions and one day everybody says oh, things are getting better. and then they're not. >> yeah, well, it's not a straight line. i think it's fair to say the economy is growing. it's been growing for more than three years.

we've created 4.4 million jobs sense job growth resumed, five million private sector jobs. the stock market is up. as you know, it's almost back close to its record high and house prices are rising the first time in six years. the economy is moving forward. we are not near recession. we're growing. having said that, it's clear the economy is not growth fast enough. it's not enough to bring down unemployment. the unemployment rate is stuck at just over 8%. and that's not good. obviously, a lot of people are hurting and it means our economy is very vulnerable to anything that could go wrong. >> schieffer: how is it going to look on election day? >> i think about the same as today. i think the economy will make it through, growing at a very slow pace, not enough to bring down unemployment. i will say in some of the swing states, particularly states like ohio, which is probably the most important swing state, the economy is doing much better. the unemployment rate is closer to 7%. they're creating more jobs and a

lot of what the president has been saying resonates because a lot is related to the auto sector which rebounded and of course he supported the auto bailout. >> schieffer: michelle rhee, i don't know how much they'll get into this in the first debate, but it's my sense that most americans would agree that our schools are not where they ought to be. why can't we seem to get it right? >> well, i think it's incredibly complicated. and one of the things that i am most worried about is the fact we haven't been talking more about education in this presidential campaign. and, quite frankly, i'm a little confuseds too why. first, because, you know, you've got governor romney who has a very solid education plan. you've got the president who i would argue of all of the things he done in the past four years, he's been most successful at education. and so, i think that the reason why potentially it's not being talked about is because both sides really have to-- are really thinking about the special interests within their party. with the democrates, the

teachers' union. they clearly don't want a lot of change to happen. with the republican, with the 53 tatterrers they don't want-- tea partiers, they don't want federal intervention. the reality is we have a significant problem in this country. request with look at where we are with the unemployment numbers and also with the fact that most employers today will tell you that for the vacancies that they have, they cannot find qualified people to fill them. there's a huge diskeck there. and i think this country is going to continue to struggle until we fix the public education system. and make sure that we are preparing the children of today for the jobs of tomorrow. >> schieffer: and back to newt gingrich. we were talking earlier about this debate and what's at stake there. i lobbied-- looked at something the otherda, i a cbs news/"new york times" poll. we had the highest number of people saying the country is on the right track now than we have i think in three years, but yet it's only 40% of people think

it's on the right track. is that a sign to you that things are getting better? >> i think it's partly a sign that people are getting used to where we are. so that, particularly if you're going to vote for obama. you begin to say to yourself, "well, it's not that bad. and he's data the best he can" i think there's a certain circ lal logic to it. my fear is i see indications that we could easily end up in a new recession. the numbers that came in on manufacturing orders, the worst since want beginning of 2009. the fact that they've readjusted the gross domestic product as you you pointed out down, to an anemic growth rate, much below the level of creating enough jobs. so i'm concerned that we're not on the right track. and frankly, when you look at education, we're clearly not on the right track. beyond partisanship-- this is not republican-democrat. it's the country which is not on the right track. and i think it's going to take very wrenching leadership over

self years to get us back, getting in shape for the future. >> schieffer: rick smith, i read your book, the title "who stole american dream?" that is a provocative title. you think this theft began somewhere back in the 70s, i guess it was. but i just want to hear you say it. you made that statement. who stole it? >> well, certainly i think it began in the 1970s. but we had a recent example of it. the fight between the nfl owners and the referees. the referees wanted to keep their traditional pension plan. the owners wanted to push them into a 401(k) plan, which by the way has been a disaster for most americans since it's been established. and it was pasted in the 1970s congress. why is that? it'sicismmatic of the american economy. the figure you just cited-- 40% think we're in the right direction. why do the other 60% think no? because there's a women. the openers of the nfl teams are

making tremendous money. they have very rich franchises and all referees want is a secure retirement, same thing that has been going on for decades here. if you look at america over the last 30, 40 years a wedge has been driven into our economic system. the middle class has stayed flat. the sense u bureau said roost year the average wage of a male worker is dead the same in 2011 as it was in 1978. 30 years of going nowhere. at the top, the top 1%, ther income went up 600% while the middle class is flat. that's why you're getting those figures. that's why we're getting slow growth. the middle class isn't being paid well enough so there's not enough demand to push our economy. the middle class are the job creators, and we're ignoring them. >> schieffer: bob woodward, your book kind of gets into that in a very contemporary way. you're just-- your book's about this gridlock we're in and how we can't seem to get out of it. you call it the "price of politics." >> y yes, i mean, what's so

obvious here-- and i would agree with the former speaker on the issue-- this shouldn't be a partisan issue. we have a federal government that does not have its financial house in order. and it's see in disorder, if back in the 90s you had been spheric and at that time there had been these difficulties, this is off the charts. we have conservative and liberals in both parties in a game of brinksmanship for the last three and a half years, not solving the problems, of running away from them, making political calculations. and just to connect can with something governor christie was saying. it's a dirty little secret-- actually, it's not a secret. that president obama knows that medicare is-- we're spending too much on it, and his secret plan,

he proposed cutting $250 billion in medicare over the next 10 years, which is exactly what the republicans are proposing. people are running away from the reality of this crisis. and i would argue-- i mean, mark's right, the economy looks good but it can go into a tailspin in the coming months, if somebody does not-- even before a new president or obama begins a second term takes office. in this i'm really not overstating this. anyone who knows about not just the fiscal cliff but the issue, this government is going to have to go into the debt market beginning of next year and ask to borrow another $1 trillion or 2 dollars. they couldn't settle this last year or this year. how are they going to settle it next year? >> bob, this sounds awfully

bleak, and it's not. i think our prospects are actually quite priet. the private sector has made a lot of progress. american businesses have reduced their cost structure. their profit margins are as wide as they ever. banks are highly capitalized. even american households have-- >> i'm not talk about the private sector. >> let me finish. >> i'm talking about the government which can screw up everything because they have such a significant role in the economy. and you must-- >> and i exactly concur. but i would argue that the political stars are alining, regardless of who wins will the presidency, president obama or governor romney, that we are going to get a deal. we are going to address the fiskital cliff. we are going to raise the treasury debt ceiling and make progress towards fiscal sustainability. if we do those things,ening what's going on in the private sector will begin to shine through, and this economy is off and running. >> the problem is you don't know. >> schieffer: let me just interject here in case there is somebody who doesn't know what the fiscal crisis is.

there are these automatic cuts in the budget going into effect on january 1 if the congress cannot find some way to come together-- >> it's automatic tax increases and you look at the numbers and i'm sure-- if these things happen, you are going to have a government-created recession. >recession. >> schieffer: what do you think, newt gingrich? do you think the democrat and republicans will be able to get together after the election? because that seems to be the only chance that this might happen in order-- >> that will depend a lot-- whoever wins the election has to spend the first 60 days prior to being sworn in reaching out to the other party. i mean, this is-- where we are right now is utterly, totally irrational. and i think whether it's president obama, who would have to fundamentally change his strategy, or governor romney who din fact, work with democrats when he was the governor of massachusetts, whoever is president, if they're serious about solving this, has to reach out. i want to make a deeper point which is what michelle has been doing. it isn't enough to talk about bigger or smaller.

we need a scale of innovation in getting these things to work. it's not about a cheaper or more expensive public school system butta system that works. it's not about the current unemployment system but one that we train workers. we don't have-- in this city we have .01% of the innovation we need, publicly in the public sector. >> we have a tax system that is crazy, bob. we have a tax system that rewards corporations for moving jobs overseas. you don't hear that discussed very much. we have a situation where banks were bailed out to the tune of $700 billion, and they're not willing to bale out homeowners sitting with high-bubble interest rates from the housing boom before it buffed and they're stuck. and that's a whole lot of unlocked-- we could unlock with consumer spending power. what we're not doing is addressing the problems of the middle class. washington is focused on what these two develop are talking bthe deficit. they have to deal with the deficit.

but once you're done with the deficit you have to rebuild the middle class in this country and nobody is paying much attention to that. we have a lot of rhetoric in the campaign but-- >> but the necessary done to help the middle class is to nail down the fiscal issues. if we don't nail down the fiscal issues, i don't think anything will matter. >> but i'm with you, i think it will happen because of necessity, because of the fiscal cliff. >> what it will take to rebuild the middle class? >> it's taken three decades to basically decimate the middle class. it will take something like that to rebuild it. but we have to be dedicated to that. we're focused on a fescal deficit not a human deficit, and we have a human deficit in this country. we have 27 million people either unemployed, working part time, unwillingly, or dropping out of the labor market. >> schieffer: let me work michelle into this conversation. as you sit here hearing this, it's always education that seems to wind up at the back of the line. >> that's right, that's right. and i think that in education,

you are already starting to see a shift. if you look at what happened a couple weeks ago in chicago. you have a democratic mayor, rahm emanuel, who is facing a $300 million deficit in the city, who is looking at 80% of the children in the city not operating on grade level in reading or mathematics. where they had the shortest school day and school year of anywhere in the country, and he's finally, uplike many democratic politicians, said enough is enough. i'm not going to give you these raises without-- what the union wanted was lifetime job security and absolutely no accountability. so he said we can't-- we can't continue on that track. and i think for him as a democratic to come out and say that shows that democrats and republicans are now saying there's a new day. and we have to move in a different direction in education. >> schieffer: let's take a quick break and we'll come back and continue this.

>> schieffer: back now with our panel. bob woodward just told us during the break about something president obama said to him. what was that? >> a couple of months ago he said as we're walking out of the oval office, a long interview for the book, he said if newt gingrich had been speaker and bob dole senate majority leader, i would have been able to work out a deal on the deficit and the debt. >> schieffer: true? >> i think it would depend a lot on obama. the big difference was we closed the government twice. we had a running fight with clinton. he reached a conclusion that he as well as we had to find a common ground. and as a result, it was a much harder, complex struggle than that. buttening whoever is elected-- but i think whoever is elected president better start literally the next day call the other party, and not just theleadersht partisan part, but every member of the other party and saying, "okay, we have four years of living together. what are we going to do for america together?" >> and that means compromise.

>> there's the magic word. >> and this is the joe biden approach on behalf of obama when they have actually worked out some deals with congress, biden goes to the republicans and says, "okay, let's do it the old way. one for you, one for me; not just drawing the line, saying you've got to do it my way. >> i think you get koms promise because both sides have leverage. tax rates are going up on everyone by law. that's going to happen. so that gives leverage to the democrats. yet sequestration, what you mentioned bob, the automatic cuts, republicans hate the defense cutses. democrats hate the nondefense cuts. and then you have the treasury debt seale chicago gives leverage to whatever party doesn't win the presidential election. i think odds are pretty high we'll get an agreement. >> i think the best place for both sides to start is in education because i sit in a lot of conversations with republicans. i spend a lot of conversations with democrats, and they agree

on a whole lot more than they disagree on. so it seems to me that both parties could come together and say okay we're going to put the partisan politics aside and look out for the interests of kids, and let's focus on education first. >> schieffer: do you know what bothers me about all this and what really worries me is i sit here and watch the congress. i know what you say is true. there are certain things that both sides want to do, but even now, this divide is so wide, even now, on things they want to do, they can't figure out how to do it. i mean, for example, a farm bill. we had the worst drought in this country since the dustbowl. yet, they could not figure out how to pass a farm bill. what's happened to our system? >> one of the things that's happened-- and obama said this when talked to him-- he said republicans came in to the oval office, look, him in the eye and said, ," if we work these things out, it will guarantee your reelection, and we don't want that to happen, so we're going to sabotage it." >> you know, the lesson may come

from the country rather than from washington. we're focused here in our conversation on washington. one of the interesting things about the auto bailout was not just that the company survived but labor and management actually sat down and started making agreements together. we have used the magic word "compromise." labor said,"okay, we'll take flat wages for the next several years." and management said, "okay, we'll bring back plant from mexico." we won't move jobs overseas. in the german economy, is is beating us all to hell-- we have a $6 trillion trade deficit, and germanys had a $2 trillion wage surplus. wages of workers went up five times faster. they have 21% of their workforce in manufacturing. they found out how to work it together, management and labor work together. the governor helping small business export. corporate tax rates that make sense and help people keep good jobs at home and export more. we could adopt policies like that and get examples from

within the economy. >> i want to point out these folks can still make deals. go back to the treasury debt ceiling deal last summer. remember all the brinksmanship that nearly drove our economy right into a ditch. they actually came out of that with something. exclude the sequestration. we got $1 trillion in spending cuts over a 10-year period. that's not inconsequential. that's one-fourth of the way we need to go-- >> wait a minute. it's all pushed off to beginning in 2013. they cut nothing real time in the administration's period. they just did not. so, you know, but this becomes important. facts do matter, and we get this idea, oh, they cut spending. they did not cut spending. they postponed it. everything in the law-- i'll bring in the law-- says beginning in 2013. >> schieffer: can they still make a deal? >> sure. i think one of the encouraging things is to look at the states. i mean if you look at what's happening in florida, what's happening in ohio, part of

what's making romney's job more conflicted is they're doing a pretty good job. scott walker has things moving. if you look at mitch daniels, maybe the model for intelligent, effective reform at the state level. there are a the love reasons to believe the underlying system is healthier than washington. my point is, whoever the winner is should put on their scheduled that half their time from that date to the inaugural is spent with all the members of the opposition party, not the leadership, but listenly literally to all the members -- if romney wins he needs to listen to democrats. if obama wins he needs to listen to republicans. they have to reestablish human ties in order to have a genuine opportunity for real compromise. >> they also need to listen to the country, because if you read polls from the country, 80% of the people will say lobbyists have too much power, and 65% of the people will say raise the tax rates at the top. they'll say spend more money on jobs and education. and things like that. so washington's not listening to the country.

it's very busy with itself. >> schieffer: i'm listening to the control room. they say our time is up. i'll be back with some final thoughts. thank you. ,,,,,,,,,,

>> schieffer: so the first of the presidential debates are upon us. they are always substandpointive and informative, but they usually bring a surprise, and even a laugh or two. >> you have one minute, sir. >> schieffer: in 1992, ross pero made it three candidates instead of the usual two, and he really livened things up. >> we've got to clean this mess up, leave this country in good shape, and pass on the american dream to them. we've got to collect the taxes to do it. if there's a fairer way, i'm all ears. >> schieffer: when i moderated the 2008 debate-- the rules tonight are simple-- a third party also figured in the proceedings, a man who had become known as joe the plumber. >> a worked hard, i'm a plumber. >> he had become a symbol of the frustration of many blue collar workers to the point when candidates sat down to debate--

>> joe the plumber-- >> schieffer: you got the idea joe was running for something, too. >> the conversation i had with joe the plumber. >> like joe the plumber. >> i'm happy to talk to you, joe, too, if you're out there. >> to people like joe the plumber. >> schieffer: joe became such a part of the conversation i thought about thanking him at the end. but this was a presidential debate. so i didn't want to be too cute. and who knows what this year will bring. but i doubt we'll hear from joe. it turns out he's busy running if are congress out in ohio. back in a minute. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students.

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>> schieffer: well, that's it for us today. be sure to tune in wednesday night, 9:00 p.m. eastern, for our cbs news coverage of the first presidential debate out in denver, moderated by my friend jim lehrer, and we'll see you here on "face the nation" next week. ,,,,,,,,,,